Sept 16 - The U.S. Securities and Exchange Commission on Wednesday announced a proposal to end its role in overseeing corporate shareholder votes on issues that include climate change and executive pay. The agency also proposed ending a rule that requires companies to produce glossy annual reports, which the SEC said duplicate information already filed in annual Form 10-Ks.
Regulators and advocates framed the move in different terms. SEC Chairman Paul Atkins said the agency lacks the statutory authority to police shareholder voting and that regulation of shareholder proposals is better handled by state law. "As we experience an exciting period of increased competition among states for corporate domicile, there is no better time for the Commission to recognize the limits of its authority, relative to state law, for regulating shareholder proposals," Atkins said in a statement.
The proposal comes amid a shift in the SEC's internal balance. The commission now has three Republican members and two seats that were previously held by Democrats remain vacant. Observers note the change in composition as part of a broader reorientation of policymaking - a movement the SEC itself characterized as recognizing limits on federal authority and deferring more to state-level governance.
States such as Texas were cited in the SEC's discussion as already offering favorable treatment to corporations that choose to incorporate locally. The agency framed this environment of competition among states for corporate domiciles as a factor in deciding to step back from oversight of the shareholder proposal process.
Investor resolutions addressing subjects like carbon emissions, workforce diversity and executive roles have been a fixture at many corporate annual meetings, though the number of such proposals has declined in recent years. Activists have warned that the SEC's proposal to change these longstanding processes could reduce their ability to influence corporate decisions on environmental matters and CEO compensation.
New York State Comptroller Thomas DiNapoli, who manages state retirement funds, criticized the proposal. "For more than 80 years, the shareholder proposal process has been a cornerstone of American corporate governance that has strengthened board oversight, improved risk management, and fostered productive dialogue between investors and companies," DiNapoli said. He added that with this proposal "the SEC has chosen to allow corporate management to shield themselves from accountability."
The SEC has opened the proposal to a public comment period. Any changes would require further action by the commission after that review.
What this covers
- The SEC proposal would remove agency oversight of shareholder voting on matters such as climate change and executive pay.
- The agency also proposed eliminating a rule requiring companies to produce glossy annual reports, citing duplication with Form 10-K disclosures.
- The commission cited limits on its statutory authority and pointed to state law as the preferred venue for regulating shareholder proposals.